Good ideas, they say, are a dime a dozen. The real skill lies in their execution. Entrepreneurship is the process of managing the risk involved in turning an idea into a product. Traditionally, there have been two dominant ways of managing this risk: taking
it all on oneself by bootstrapping, or offloading it to large investors, like banks and venture
capital firms, in exchange for equity. However, over the last decade, crowdfunding has
emerged as an alternative to these traditional forms of risk management. In fact, in 2016,
more money was raised in the United States through crowdfunding than venture capital [ 1].
Seldom understood, though, is that crowdfunding is not just an alternative funding strategy,
but a funding strategy that allows the
pursuit of entirely new classes of ideas
previously inaccessible to entrepreneurs.
Of particular interest is the class of ideas
loosely described as “open hardware.”

THE COST OF OPEN HARDWARE

Roughly speaking, open hardware isthe physical analog of open sourcesoftware. Just as the source code ofopen source software is freely avail-able for viewing and modification, thedesign files—the schematics, layout,mechanical CAD, firmware, and billof materials—that go into making aphysically open hardware product canbe inspected and altered, subject to theexact licenses used. The difference be-tween open hardware and open sourcesoftware is simply one of cost: Manufac-turing hardware is orders of magnitudemore expensive, both in terms of timeand money, than developing equallycomplex soft ware. Bits are cheap; atomsare expensive.

Because nearly all companies,
whether they know it or not, rely on and
use open source software in one way or
another, there is a healthy market for
enterprise service providers of open
source software. Companies such as
Redhat, Puppet, and Docker build and
maintain open source software, and
make money from enterprise sales of
premium versions.

However, the same is not true ofopen hardware. Hardly anyone owns,let alone uses, open hardware, and so,there is no market for enterprise-levelservice providers. Creating such a mar-ket would require a massive amount ofcapital investment in manufacturingand distribution. Since banks don’t in-vest in unproven strategies, and venturecapital firms don’t invest in ideas thatcan be easily copied, traditional fund-ing strategies for open hardware areout. That leaves crowdfunding.

In fact, crowdfunding is particularly well suited to the demands of open
hardware development and deployment. Both crowdfunding and open
hardware rely on collective action at the
grassroots level, so people drawn to one
are likely to be more receptive to the
other. Moreover, the resulting market
of crowdfunded open hardware is, in
theory, quite efficient. Consumers can
directly influence, or even become, producers without the mediation and un-

Identity: The killer appof crowdfundedopen hardwareIn the next 20 years, the notion of a secure, verifiable identity will drivethe adoption of crowdfunded open hardware.